Swinging is fun. Apparently.
Whilst I can't speak from experience in a juicier context, I can give some insights into swing trading instead. This is a strategy where you take a position for a few weeks or months, combining technical and fundamental analysis in an attempt to make a return from a share price closing a gap, trading to a different point in a channel or just performing in a specific way vs. a peer in the sector.
I find this to be incredibly fun, as these strategies can generate great annualised returns if you get them right. Making e.g. a 10% return in a matter of 3 months is lovely. Of course, it's easy to lose 10% over the same time period.
One of my recent swing trades was a long position in Spar. After a sharp sell-off in the stock at the end of 2021, I took a look at the underlying reasons and operations and decided that it was worth a punt ahead of a su bsequent earnings update. My average purchase price was R164 and it closed yesterday at R148, so this clearly didn't work.
Importantly, whenever I look at trades like these, I size them accordingly. I prefer lots of smaller positions vs. a few concentrated positions. The latest Spar result is a perfect example of why, as my bull thesis played out largely as expected but there were negative surprises in other businesses that offset the good news. I think Spar has every chance of being a slow and frustrating burn from here.
I wrote on the Spar update and my swing trading thesis in one of today's feature articles.
There's also a feature article on Sanlam's operational update, which discloses a horrible drop in headline earnings. The insurance busin ess has been severely impacted by the floods. Of course, in a four-month period, a significant event has an even larger impact in percentage terms than would be the case over a full financial year. Still, seeing numbers like these out of Sanlam is quite something. Get all the details here.
For the other updates on the market, remember to read Ghost Bites, a daily article that covers all the news on the JSE.
The team at TreasuryONE has been doing a wonderful job of keeping us updated on currency movements. The rand finally dipped below R15.30, a key level that Wichard Cillie rs (Head of Market Risk at TreasuryONE) has been writing about. The rand is still disconnected from the other emerging market currencies, which suggests that the rand strength is based on strong fundamentals.
It's important to look ahead to Friday's CPI print. Whilst it could signal a renewed surge in the US dollar, a disappointing print could be the catalyst for the rand to break through key technical levels.
Be sure to visit the TreasuryONE website and reach out to the team to learn more about their market risk, treasury and other solutions. I will certainly be watching the rand, as I've been waiting for an opportunity to shift more capital into my US dollar portfolio, with a view to deploying it into selected stocks.
One of the many joys of using EasyEquities is that I can invest in US-based companies on the platform and see all my positions (local and offshore) in one place. To learn more about the joys and challenges of investing in the US, you should listen to the Easy Does It podcast episodes at this link. Hosted by DJ@Large, I was joined by my Magic Markets partner Mohammed Nalla to discuss our insights into US stocks.
Finally, make some time to listen to Episode 78 of Magic Markets, in which we give you a sneak peak at the companies we have covered in Magic Markets Premium. We used the opportunity to share insights on Lululemon, Nike, Starbucks, Pepsico, Visa, Simon Property Group and Lockheed Martin.
Lots to learn today - enjoy it!
